Tungsten,Inc.manufactures both normal and premium tube lights.The company allocates manufacturing overhead using a single plantwide rate with machine hours as the allocation base.Estimated overhead costs for the year are $106,000.Additional estimated information is given below. $$\begin{array} { | l | l | l | }
\hline & { \text { Normal } } & \text { Premium } \
\hline \text { Machine hours (MHr) } & 30,000 & 34,000 \
\hline \text { Direct materials } & \$ 52,000 & \$ 400,000 \
\hline
\end{array}$$ Calculate the predetermined overhead allocation rate.(Round your answer to the nearest cent.)
A) $3.53 per direct labor hour
B) $1.66 per machine hour
C) $3.12 per machine hour
D) $0.23 per direct labor hour

Question

Tungsten,Inc.manufactures both normal and premium tube lights.The company allocates manufacturing overhead using a single plantwide rate with machine hours as the allocation base.Estimated overhead costs for the year are $106,000.Additional estimated information is given below. $$\begin{array} { | l | l | l | } 
\hline & { \text { Normal } } & \text { Premium } \
\hline \text { Machine hours (MHr) } & 30,000 & 34,000 \
\hline \text { Direct materials } & \$ 52,000 & \$ 400,000 \
\hline
\end{array}$$ Calculate the predetermined overhead allocation rate.(Round your answer to the nearest cent.)
A) $3.53 per direct labor hour
B) $1.66 per machine hour
C) $3.12 per machine hour
D) $0.23 per direct labor hour

Quizplus · Accepted Answer

The predetermined overhead allocation rate is calculated by dividing the total estimated overhead costs by the total estimated machine hours. Here, the total overhead costs are $106,000, and the total machine hours are 30,000 + 34,000 = 64,000. Thus, the rate is $106,000 / 64,000 = $1.65625, which rounds to $1.66 per machine hour.

Tungsten,Inc Calculate the Predetermined Overhead Allocation Rate